General manager John Elway huddled with coach Vance Joseph and team president Joe Ellis and "we agreed that releasing Chad was the right thing to do", Elway said in a statement.
Kelly ignored questions on his way back to his SUV in the parking lot about half an hour before the Broncos announced they were waiving him. When he told officers he wanted to pursue criminal charges, Kelly was arrested and booked into the Arapahoe County Detention Center.
Officers responded to the 3200 block of South Lincoln Street about 1:15 a.m. on a report of a man standing outside a residence. Kelly was reportedly mumbling incoherently. The 24-year-old's struggles began when he was kicked off his high school team for disciplinary reasons.
Officers began to search the area after reviewing security video of the front of the house that showed a man wearing dark trousers, a white long-sleeve shirt with a brown vest and a red scarf around his neck.
If he gets another chance with another team, Kelly could still face discipline from the National Football League, which said Tuesday that it is reviewing the matter.
Kelly, who was selected with the final pick of the 2017 draft, was arrested on Tuesday after being charged with first-degree criminal trespassing.
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The nephew of Hall of Fame quarterback Jim Kelly, Chad will now be subject to the NFL's waiver wire.
Kelly was eventually escorted from the party, where Broncos players were "not happy" with his behavior.
The male homeowner was brought to the Gothic Theatre where he positively identified Kelly as the man who entered the residence uninvited.
It's hard to trust him even as a modest backup, but Kelly's preseason resume and college statistics will entice at least one organization. "Irrelevant." He missed all of last season with an injury.